Competition
As a one and done stock General Electric Company (NYSE:GE) competes most closely with Berkshire Hathaway. While Berkshire Hathaway is a great company and is slightly outperforming GE, up over 30% over 52 weeks and also hitting a 52 week high on March 8 of $104.00, it has no yield. One other concern with Berkshire Hathaway is its exposure to what I would call Warren’s Whims, newspapers and some small companies that for the life of me I can’t understand why Buffett bought (Oriental Trading and Pampered Chef). As Berkshire Hathaway is an insurance giant multi-year trends toward extreme weather given its exposure to property and casualty is a drawback.
Siemens Aktiengesellschaft is GE’s most direct competitor as a diversified industrial conglomerate. The Munich, Germany based company, founded in 1847, has almost all the same interests (energy, healthcare, finance, infrastructure, appliances, etc) as General Electric Company (NYSE:GE) and slightly lower P/E at 17.18 and a forward P/E of 11.32. But the yield is slightly lower as well at 2.70%.
The PEG of Siemens is lower than GE’s (1.34) at .41 and the stock has underperformed the S&P 500, only up 9% over the last year. Undoubtedly, this is partly due to negative sentiment over European stocks in general, warranted or not.
One last reason I prefer GE to Siemens is the “shale gas revolution” (Immelt’s words) that GE is closely involved in working on several fronts in the fracking process. From the annual report,” GE Power & Water is partnering with memsys, a water technology company, to develop membrane distillation technology, which promises to be an effective, energy-efficient solution for treating wastewater generated during the gas extraction process.” If you listen to Jim Cramer for more than two days in a row you can’t get away from his belief that shale and natural gas are still our future, even more so since the President mentioned it in his State of the Union address.
The operating margin at General Electric Company (NYSE:GE) (12.18%) is better than Siemens (9.01%). The industrial segments of GE reported earnings growth of 10% and now comprise 55% of total returns according to the 2012 annual report released on March 11 .
General Electric Company (NYSE:GE) going forward
GE is currently reducing its GE Capital size to 2008 levels while it also grows the industrial segments. In particular, by 2030 infrastructure is expected to see $60 trillion in investment. The clear commitment to the dividend and buybacks are encouraging as well.
While GE once touched $60 a share in the early 2000’s, thanks to the financial crisis and its exposure from GE Capital it fell to single digits. Analysts see 10% plus five year EPS growth. GE is really a very versatile stock for an investor who wants the triple threat of growth, yield, and diversification. This is a name to keep on your radar for any pullback opportunities.
The article The Biggest Game Changer in History originally appeared on Fool.com and is written by AnnaLisa Kraft.
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